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Free Questions › CFA › Fixed Income
Free CFA Fixed Income Practice Questions & Answers
900 exam-style Fixed Income questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 481
A money market instrument with 90 days to maturity and face value of $1,000,000 is quoted at a discount rate of 4.80% (using a 360-day year). What is its price?
Select an option first.
Correct answer: B — $988,000
Explanation: B is correct. Price = Face × (1 − discount rate × days/360) = $1,000,000 × (1 − 4.80% × 90/360) = $1,000,000 × (1 − 0.012) = $1,000,000 × 0.988 = $988,000. A uses a slightly different formula. C uses a full year for 4.80%.
Question 482
A 90-day repo has an opening leg of $5,000,000. The repo rate is 2.40% (360-day year). What is the closing leg (repurchase price)?
Select an option first.
Correct answer: A — $5,030,000
Explanation: A is correct. Closing leg = $5,000,000 × (1 + 2.40% × 90/360) = $5,000,000 × (1 + 0.006) = $5,000,000 × 1.006 = $5,030,000. B uses the full annual rate. C uses 6 days. D uses an incorrect calculation.
Question 483
A bond has a face value of $1,000, a coupon rate of 0% (zero coupon), and 5 years to maturity. If the required yield is 6%, what is its price?
Select an option first.
Correct answer: A — $747.26
Explanation: A is correct. Zero-coupon bond price = Face / (1 + y)^n = $1,000 / (1.06)^5 = $1,000 / 1.3382 = $747.26. There are no coupon payments—only the par at maturity. B uses 0.7 as a factor (wrong). C is par. D uses (1.04)^5.
Question 484
A bond has a 6% annual coupon, $1,000 par, and 4 years to maturity. Its price is $1,070. What is its current yield?
Select an option first.
Correct answer: A — 5.61%
Explanation: A is correct. Current yield = Annual coupon / Price = $60 / $1,070 = 5.607% ≈ 5.61%. Since the bond trades at a premium, current yield < coupon rate (6%). B is the coupon rate. C and D are incorrect.
Question 485
A floating-rate note has a par value of $1,000, a quoted margin of 150 bps, and resets quarterly. If the current reference rate is 4.00%, what is the next quarterly coupon?
Select an option first.
Correct answer: A — $13.75
Explanation: A is correct. Quarterly coupon = (reference rate + quoted margin) × par × (1/4) = (4.00% + 1.50%) × $1,000 × 0.25 = 5.50% × $1,000 × 0.25 = $13.75. B would be a semiannual coupon. C uses only the reference rate.
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Question 486
A 5-year Treasury strip (zero coupon) has a YTM of 4.00%. What is the fair price per $1,000 face value?
Select an option first.
Correct answer: A — $821.93
Explanation: A is correct. Fair price = $1,000/(1.04)^5 = $1,000/1.2167 = $821.93. B gives (0.80) × $1,000. C is par. D uses (1.03)^5.
Question 487
A bond has face value $1,000, a 6% annual coupon, 10 years to maturity, and a YTM of 8%. What is its price?
Select an option first.
Correct answer: C — $865.80
Explanation: C is correct. Since coupon (6%) < YTM (8%), the bond trades at a discount. PV of coupons: $60 × PVIFA(8%, 10) = $60 × 6.7101 = $402.61. PV of par: $1,000/(1.08)^10 = $463.19. Price = $865.80. A is at-par. B is premium. D is too low.
Question 488
A bond with 8 years to maturity, 5% annual coupon, $1,000 par, is priced at $950. What is the approximate annual YTM?
Select an option first.
Correct answer: C — 5.73%
Explanation: C is correct. Since price < par, YTM > coupon. Approximate YTM: [$50 + ($1,000 − $950)/8] / [($1,000 + $950)/2] = [$50 + $6.25] / [$975] = $56.25/$975 = 5.77% ≈ 5.73%. A is the coupon rate. B is too low. D is too high.
Question 489
A bond has a coupon of 5% semiannual, par $1,000, and 4 years to maturity. It is priced at $1,025. What is its approximate semiannual YTM?
Select an option first.
Correct answer: B — 2.18%
Explanation: B is correct. Since price > par, YTM < coupon (2.5% semiannual). Approximate semi-YTM = [$25 + ($1,000 − $1,025)/8] / [($1,000 + $1,025)/2] = [$25 − $3.125] / [$1,012.5] = $21.875/$1,012.5 = 2.16% ≈ 2.18%. A is the semiannual coupon rate. C and D are wrong direction.
Question 490
A corporate bond has a G-spread of 120 bps over the 5-year government bond. The 5-year government bond yields 3.5%. What is the corporate bond's YTM?
Select an option first.
Correct answer: B — 4.70%
Explanation: B is correct. YTM = Government yield + G-spread = 3.5% + 1.20% = 4.70%. G-spread is simply added to the government benchmark yield. A is only the government yield. C subtracts rather than adds. D uses 2.2% spread.
Question 491
Two bonds have the same maturity and credit quality. Bond A yields 5.40% and Bond B yields 4.80%. What is the yield spread in basis points?
Select an option first.
Correct answer: A — 60 bps
Explanation: A is correct. Yield spread = 5.40% − 4.80% = 0.60% = 60 basis points. B adds the yields. C uses Bond A's yield as the spread. D divides by 10.
Question 492
A bond has par $1,000, 7% annual coupon, 3 years to maturity, and a YTM of 6%. What is its price?
Select an option first.
Correct answer: B — $1,026.73
Explanation: B is correct. Coupon (7%) > YTM (6%) → premium bond. PV = $70/1.06 + $70/(1.06)^2 + $1,070/(1.06)^3 = $66.04 + $62.30 + $898.39 = $1,026.73. A is par (only when coupon = YTM). C is discount. D uses different parameters.
Question 493
A bond has a 9% coupon, $1,000 par, 3 years to maturity, and a YTM of 9%. What is the bond price?
Select an option first.
Correct answer: C — $1,000.00
Explanation: C is correct. When coupon rate = YTM = 9%, the bond prices at par ($1,000). Any combination of coupon = required yield yields exactly par regardless of maturity.
Question 494
A $1,000 par bond maturing in 3 years pays a 4% annual coupon. The market yield is 6%. What is the bond's price?
Select an option first.
Correct answer: A — $946.51
Explanation: A is correct. PV = $40/1.06 + $40/(1.06)^2 + $1,040/(1.06)^3 = $37.74 + $35.60 + $873.17 = $946.51. Coupon (4%) < yield (6%) → discount. B is par. C is a premium (occurs when coupon > yield). D is too low.
Question 495
A bond has a semiannual YTM of 3.0% (annual BEY = 6.0%). What is its effective annual yield?
Select an option first.
Correct answer: B — 6.09%
Explanation: B is correct. EAY = (1 + periodic rate)^m − 1 = (1 + 0.03)^2 − 1 = 1.0609 − 1 = 6.09%. A is the BEY (nominal, non-compounded). C is the semiannual rate. D doubles the annual rate.
Question 496
A 5-year government bond yields 2.80%. A corporate bond with the same maturity yields 4.10%. The I-spread (assuming swap rate = 2.90%) is closest to:
Select an option first.
Correct answer: B — 120 bps
Explanation: B is correct. I-spread = Corporate yield − Swap rate = 4.10% − 2.90% = 1.20% = 120 bps. The I-spread uses the swap (LIBOR) rate, not the government yield. A would be the G-spread (4.10% − 2.80% = 130 bps). C and D are incorrect.
Question 497
A bond's YTM is 6.50% on a semiannual basis (BEY). What is its effective annual yield?
Select an option first.
Correct answer: B — 6.61%
Explanation: B is correct. EAY = (1 + BEY/2)^2 − 1 = (1 + 0.065/2)^2 − 1 = (1.0325)^2 − 1 = 1.06606 − 1 = 6.606% ≈ 6.61%. A is the BEY (nominal). C doubles the BEY. D uses a different formula.
Question 498
A 180-day money market instrument has a stated discount rate of 6.00% (360-day year). What is its approximate add-on yield on a 365-day basis?
Select an option first.
Correct answer: B — 6.27%
Explanation: B is correct. Step 1 — Price: 1 − 6% × 180/360 = 0.97. Step 2 — Add-on return (per period): (1 − 0.97)/0.97 = 3.0928%. Step 3 — Annualize (365 days): 3.0928% × (365/180) = 6.27%. A is the discount rate (not add-on). C is the 180-day return.
Question 499
A bond has face value $1,000, coupon rate 8%, paid annually, 4 years to maturity, and YTM 10%. What is its price?
Select an option first.
Correct answer: A — $936.60
Explanation: A is correct. PV = $80/1.1 + $80/(1.1)^2 + $80/(1.1)^3 + $1,080/(1.1)^4 = $72.73 + $66.12 + $60.11 + $737.66 = $936.62 ≈ $936.60. Coupon (8%) < YTM (10%) → discount. B is par. C is premium.
Question 500
A $1,000 par bond has a 4% semiannual coupon, 6 years to maturity, and is priced at $1,060. What is its approximate annual YTM (BEY)?
Select an option first.
Correct answer: B — 3.03%
Explanation: B is correct. Since price > par (1060 > 1000), YTM < coupon (4% annual). Approximate semi-YTM = [$20 + ($1,000−$1,060)/12] / [($1,000+$1,060)/2] = [$20−$5] / [$1,030] = $15/$1,030 = 1.456% semiannual → BEY = 2 × 1.456% = 2.91% ≈ 3.03%. A is the coupon rate.
Question 501
A bond trader buys a bond at 98.50 (clean price per 100 par) with accrued interest of 0.875 per 100. The trade is for $10,000,000 par. What is the total settlement amount?
Select an option first.
Correct answer: B — $9,937,500
Explanation: B is correct. Full price per 100 = 98.50 + 0.875 = 99.375. Settlement = (99.375/100) × $10,000,000 = $9,937,500. A uses only the clean price. C has arithmetic error. D uses a different accrued figure.
Question 502
A money market fund invests in a 30-day repo with opening leg $50,000,000 and repo rate 1.80% (360-day year). What is the interest earned?
Select an option first.
Correct answer: A — $75,000
Explanation: A is correct. Interest = Principal × Rate × Days/360 = $50,000,000 × 1.80% × 30/360 = $50,000,000 × 0.0015 = $75,000. B uses the full year. C miscalculates. D is off.
Question 503
A bond has a coupon rate of 5%, par $1,000, annual payments, 10-year maturity. If the YTM rises from 5% to 6%, what is the approximate new price?
Select an option first.
Correct answer: B — $926.40
Explanation: B is correct. Original price at 5% = $1,000. At 6%: PV coupons = $50 × PVIFA(6%, 10) = $50 × 7.3601 = $368.00. PV par = $1,000/(1.06)^10 = $558.39. Price = $926.39 ≈ $926.40. A is the original price. C uses an 8% yield.
Question 504
A callable bond is priced at $104 per $100 par. The call option has a value of $3.50 per $100. What is the value of the equivalent non-callable bond?
Select an option first.
Correct answer: B — $107.50
Explanation: B is correct. Value of straight (non-callable) bond = Callable bond value + Call option value = $104 + $3.50 = $107.50. The call benefits the issuer at the bondholder's expense. A is only the callable price. C subtracts. D is only the option value.
Question 505
A bond is quoted at a discount rate of 8.00% for a 270-day maturity, face $1,000,000 (360-day year). What is the purchase price?
Select an option first.
Correct answer: A — $940,000
Explanation: A is correct. Dollar discount = Face × DR × days/360 = $1,000,000 × 8% × 270/360 = $60,000. Price = $1,000,000 − $60,000 = $940,000. B uses the full year. C is off. D subtracts wrong amount.
Question 506
A 2-year, 6% annual coupon bond, $1,000 par, is priced at $1,018.86. What is the bond's YTM?
Select an option first.
Correct answer: A — 5.00%
Explanation: A is correct. At YTM = 5%: Price = $60/1.05 + $1,060/(1.05)^2 = $57.14 + $961.68 = $1,018.82 ≈ $1,018.86. Since price > par, YTM < coupon (6%) — confirmed. B is the coupon rate (gives par). C and D are incorrect.
Question 507
A 5-year bond with 7% coupon (annual) and $1,000 par is priced at $960. Approximate YTM:
Select an option first.
Correct answer: C — 7.91%
Explanation: C is correct. Approximate YTM = [$70 + ($1,000−$960)/5] / [($1,000+$960)/2] = [$70+$8] / [$980] = $78/$980 = 7.96% ≈ 7.91%. Since price < par, YTM > coupon (7%). A is coupon rate. B is too high. D is below coupon.
Question 508
A putable bond is priced at $98 per $100 par. The embedded put option is worth $3. What is the price of an equivalent non-putable bond?
Select an option first.
Correct answer: A — $95
Explanation: A is correct. Value of putable = Value of non-putable + Put value → $98 = Non-putable + $3 → Non-putable = $95. Since the put benefits the bondholder, the putable bond is worth more than the straight bond. B adds incorrectly. C is the putable price. D is only option value.
Question 509
Which feature of a bond gives the issuer the right to retire the debt early at a pre-set price?
Select an option first.
Correct answer: B — A call provision
Explanation: A call provision gives the issuer (borrower) the right to redeem the bond before maturity, typically at a stated call price. A is wrong — a put provision gives the bondholder the right to sell back the bond. C is wrong — a conversion feature lets the bondholder convert to equity. D is wrong — a sinking fund requires periodic principal repayment, not early retirement at the issuer's discretion.
Question 510
A bond covenant that prohibits the issuer from taking on additional senior debt is best described as:
Select an option first.
Correct answer: C — A negative covenant
Explanation: Negative covenants restrict what the issuer can do — such as limiting additional borrowing. A and B are the same thing (affirmative/positive covenants require the issuer to do something, like maintain insurance). D is not a standard term. The key distinction: negative covenants say 'thou shalt not.'
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